Wall Street ended sharply higher on Wednesday after the Federal Reserve said it would end its pandemic-era bond purchases in March as it exits from policies enacted at the start of the health crisis. The TSX also rose, but gains were less impressive as many resource stocks lost ground.
Following its two-day policy meeting, the Fed signaled its inflation target has been met, and its announcement on ending the bond purchases paved the way for three quarter-percentage-point interest rate increases by the end of 2022.
All three main U.S. stock indexes reversed earlier losses and climbed into positive territory. Wall Street extended those gains as Fed Chair Jerome Powell during his news conference struck an upbeat tone about the U.S. economic recovery and expressed willingness to raise interest rates as necessary to control inflation.
“What the markets are saying is, because the Fed is increasing their taper, maybe they feel inflation is under control,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta. “They did what was expected. It’s going to add to the credibility for the Fed and that will be - on balance - neutral to positive for the markets.”
The S&P 500′s sharp rise on Wednesday erased almost all of its losses from earlier this week and left it just short of its record-high close on Friday.
For the session, the Dow Jones Industrial Average rose 1.08% to end at 35,927.43 points, while the S&P 500 gained 1.63% to 4,709.85.
The Nasdaq Composite climbed 2.15% to 15,565.58.
Volume on U.S. exchanges was 12.2 billion shares, strong compared with the 11.6 billion average over the last 20 trading days.
Inflation and higher interest rates have become a major concern on Wall Street in recent months. Data on Tuesday showed producer prices increased more than expected in the 12 months through November, clocking their largest gain since 2010. Last week’s consumer prices data showed the biggest gain in almost four decades.
“You had hedge funds positioned for the worst, in the terms of the worst for equities, coming in to the Fed statement,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. “Today, I think, is a function of sell the expectation and buy the news.”
Among the 11 S&P 500 sector indexes, technology jumped 2.7% and healthcare rallied 2.1%. Apple Inc climbed 2.85% and Nvidia Corp rallied 7.49%, with both lifting the S&P 500 more than any other stocks. The Philadelphia Semiconductor index jumped 3.7%.
Advancing issues outnumbered declining ones on the NYSE by a 1.85-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored advancers. The S&P 500 posted 40 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 38 new highs and 545 new lows.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 120.59 points, or 0.6%, at 20,769.16, its first higher close since Dec. 7.
Domestic data showed that the annual inflation rate remained at 4.7% in November, the highest since March 2003, as supply-chain disruptions continued to exert upward pressure on prices.
Canada’s government implored residents not to leave the country as provinces ramp up vaccinations to combat the fast-spreading Omicron coronavirus variant.
Technology shares on the Toronto market advanced 1.4%, while the heavily weighted financials sector was up 0.9%. Resource shares were a drag, with the energy sector dipping 0.1% and the materials group, which includes precious and base metals miners and fertilizer companies, losing 0.6%.
Prices of copper and most other industrial metals fell as data from China, the biggest consumer, pointed to slowing economic growth and therefore weaker demand for metals.
Reuters, Globe staff
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